Health care costs in Connecticut are among the highest in the nation and are expected to increase annually by up to nine percent in the coming years. At the same time, in little more than one year, every American will be required to have health coverage.
While the federal Affordable Care Act (ACA) includes many provisions to reduce those costs and to make sure it actually covers what people need, Connecticut’s marketplace is currently planning to reject the best tool for reducing costs — negotiating for the best price.
Health insurance exchanges, created under the ACA with millions in federal funds, are intended to provide a fair, transparent market where consumers and small businesses can purchase affordable, decent health insurance. One in 10 state residents is expected to purchase coverage through the exchange, including the 140,000 state residents who are eligible for affordability subsidies and required to purchase insurance there.
The best hope to keep costs down in the exchange is through negotiation with insurance companies. It is a practice called active purchasing. Small businesses pay 18 percent more than large companies for health insurance, in part because large companies have the volume to negotiate for better rates and quality. Insurance companies compete for their business, keeping costs down. Because the Connecticut exchange will be far larger than any private company in the state, it seems only logical that the exchange would leverage that market strength to get better bargains for individual consumers and small businesses.
Indeed, such negotiations for better rates for larger groups is the basic premise of the so-called “pooling” bills, advocated by legislative leadership and supported by Democrats statewide for several years.
Yet the Connecticut Health Insurance Exchange has said active purchasing would be too difficult to implement, and they do not expect to even attempt it.
Other states recognize the benefits of active purchasing. Massachusetts and California’s exchanges use active purchasing to promote value. Massachusetts’ exchange saves consumers up to $20 million each year in premiums through negotiation and has kept the rate of increase in health costs to half of that outside the exchange.
By contrast, Utah’s insurance exchange includes plans from any insurer who applies, as Connecticut is proposing, and premiums inside that exchange are actually $60 to $150 per month higher than in the rest of the market.
Connecticut consumers and small businesses are already skeptical about the value of health insurance and of the benefits of the government-run exchange, recent research shows.
But the same consumers and small businesses were far more supportive of active purchasing. In fact, they believe it is the most attractive feature of an exchange. They liked that “big insurance companies [would] compete for their business.” If the exchange rejects active purchasing, it is unclear what value they add to an already consumer-hostile marketplace.
State law encourages Connecticut’s exchange to negotiate for consumers and the federal government has supplied the state with millions of dollars to implement a competitive system. States ahead of us like Massachusetts and California provide valuable templates for the successful implementation of active purchasing.
We have a unique opportunity, but it isn’t open ended. Connecticut is the land of steady habits. If we don’t open the Exchange with active purchasing, it will never happen.
Affordability is key to getting Connecticut residents, and indeed, everyone, covered by health insurance. Consumers both inside and outside of the exchange would benefit from active purchasing and lower premiums. If Connecticut doesn’t do anything differently with this historic opportunity, what is the point of the exchange?
Ellen Andrews is the executive director of the Connecticut Health Policy Project.